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The gig economy – flexible but tricky to measure

Advisor, Productivity Commission
27 May 2019

It is hard to find a discussion about the future of work without some reference to the emergence of the so-called gig economy. In a speech last year, Grant Robertson suggested that the gig economy has challenged “the very notion of what a job is”.

This statement begs the question: how big is the gig economy in New Zealand? And perhaps more importantly - is it growing? Unfortunately, answering these questions is much harder than you might think, as I recently learned while attending the Society of Labor Economists Conference in Arlington, VA (with our blog co-ordinator Dave Heatley).

In her presidential address at the conference, Katharine Abraham from the University of Maryland discussed the paper Measuring the Gig Economy: Current Knowledge and Open Issues, which she co-authored. The study attempted to estimate changes in the number of gig workers in the US, using two main sources of a data – a census-based survey and administrative tax data.

It turns out that these two data sources produce very different estimates. According to the tax data, the number of gig workers steadily rose between 1996 and 2012, from 9.5% to just over 11% of the US workforce. In contrast, the survey data suggested that the number of gig workers was at a lower level (compared to the tax data) in 1996 – roughly 7% - and this number declined slightly between 1996 and 2012.

To help understand these discrepancies, Abraham et al. were able to exploit linkages between the two data sets to explore how people’s survey responses differed from their tax records.

The results were striking! They found that roughly two thirds of workers who reported self-employed earnings in the tax data did not report any self-employment income in the survey. And about one half of those who reported self-employment income in the survey didn’t have any reported in the tax data.

How could that be? The authors offered a few possible explanations.

  • People who performed gig work may not have thought to report their income in a survey (eg, because the work only generated a small amount of earnings).
  • Some gig workers may not have earned enough to trigger tax reporting requirements or may have been working ‘off-the-books’.
  • Some gig workers may have thought of themselves as regular employees even though they were treated as self-employed for the purposes of tax data.

In New Zealand, the best data we have on gig workers comes from the Household Labour Force Survey – specifically, self-employed workers as a proportion of the workforce. The data going back as far as 1987 does not show any clear trend.

Share of New Zealand's total workforce who are self-employed

Self-employed workforce NZ

However, gig workers who have another more permanent job as their main source of income will not even show up in this data. This is a real problem, given that the income earned by gig workers via online platforms in many cases is likely to be relatively small and supplement more permanent sources of income. For example, a survey undertaken earlier this year of Uber drivers in Australia showed that just under 60% of drivers concurrently have a full-time job, a part-time job or own a business, while 10% and 6% of drivers are studying and retired respectively.

The self-employed data also includes those people who own their own business, not exactly the type of work most would characterise as gig work.

Given these issues, and based on the lessons of the US, we may want to take current survey estimates with a grain of salt, at least as measures of the number of gig workers in the workforce. Going forward, clarifying how gig work is defined, and collecting better data on workers’ secondary jobs will likely be necessary steps for us to reliably estimate the growth (or decline) in New Zealand’s gig economy.

References

K. G. Abraham, K. Sandusky, J. C. Haltiwanger. J. R. Spletzer. 2017. Measuring the Gig Economy: Current Knowledge and Open Issues. Retrieved from https://www.nber.org/chapters/c13887.pdf

AlphaBeta. 2019. Flexibility and fairness: What matters to workers in the new economy. Retrieved from https://www.nber.org/chapters/c13887.pdf

Stats NZ Household Labour Force survey data

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  • Gravatar for Tom

    Tom 28 May 2019, 12:46 (4 months ago)

    The Gig economy can provide positive change if managed well. However, my gut feeling is that the deeper it digs and the wider it spreads the more humanity will realise that menial tasks can't be avoided. So who will perform these menial tasks? Will they be equitably shared, or will there be a tendency for them to repeat history, that is settle at the bottom of the bell curve? What is the strategy that will ensure this will not happen? Wish I had an answer.

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  • Gravatar for Grace

    Grace 28 May 2019, 11:18 (4 months ago)

    Thanks for your reply Tim. This sounds like it's going to be really important for NZ to think about, particularly if it's not going to be so much an issue of having a primary, and then a secondary job, but rather a series of gigs that come together to create an overall package of total employment (that, as with today's freelancers, can be lumpy). I also think those who tie the gig economy to online platforms are defining it too narrowly - it creates an artificial definition of what is or isn't gig work (e.g. it misses out on other temporary jobs that are coordinated 'offline', despite the relationship potentially having been initiated through the platform). It seems to me at least that it should be more about development a much understanding the entire landscape of flexible work into the future.

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  • Gravatar for Grace

    Grace 27 May 2019, 15:52 (4 months ago)

    Interesting article Tim, thanks. So what suggestions do you have about how to actually measure it in NZ? What could some of the characteristics that define the gig economy actually be?

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    • Gravatar for Editor

      Editor 27 May 2019, 19:27 (4 months ago)

      Thanks Grace! As mentioned in the post, two key issues with the data at the moment are 1) data typically only looks at a worker’s primary job and 2) data on self-employed workers includes those who own their own business and have a relatively predictable flow of work. On the first issue, collecting more data on the nature of workers’ secondary jobs will be an important first step to measure the full extent of the gig economy. On the second issue, US data is able to separate out the two types of workers to some extent by distinguishing between self-employed incorporated workers and unincorporated workers. Something like this may be possible in New Zealand. Because of the diversity of self-employment arrangements (eg, business owner, freelancer, on-demand worker), defining a gig-worker is not straightforward or obvious. The paper by Abraham et al. that I discussed in the post, identifies some characteristics that might be useful for distinguishing between gig work and other work arrangements. These include whether a worker’s work schedule is predictable, whether their earnings are predictable, and whether their working relationship can be expected to continue into the future.
      Tim

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